23 September 2013
I faced following issue in audits- Private ltd.Company has sold fixed assets in FY 12-13.Profit on sale is credited to P & L A/c.My query is whether profit in excess of original cost should be credited to capital reserves?AS 10 and AS 5 requires same to be disclosed under P&L. Guidance note on terms used in Financial statement issued by icai describes reserve not available for distribution.In light of above whether treatment given by Company is right?
23 September 2013
IF SELLING PRICE IS MORE THAN ORIGINAL COST, THE DIFFERENCE BETWEEN ORIGINAL COST AND SELLING PRICE WILL BE TREATED AS CAPITAL PROFIT AND WILL BE TRANSFERRED TO CAPITAL RESERVE..
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